4/26/2006 @ 12:01AM

Double-Duty Phones

Cell-phone manufacturers are readying their newest pitch to consumers: A technology that can offer them better coverage, cheaper minutes and the ability to use a single phone instead of switching between their home phones, office network and mobile handsets. The catch: getting U.S. wireless carriers to play along.

At issue are a new generation of devices from
Nokia
,
Motorola
and Samsung that offer “dual-mode” technology–the ability to make calls using either traditional cellular networks or broadband Wi-Fi networks–and will likely ship by the end of 2006.

The ability to make the hand-off comes from a protocol called UMA, created two years ago by a consortium of carriers and manufacturers including T-Mobile, Cingular and Nokia. The technology allows wireless carriers to maintain control of customer calls that end up outside of the cellular network, like a Wi-Fi network in a home, office or other hot spot. On Wednesday, Nokia announced that it had partnered with Wi-Fi outfit
iPass
to offer wireless access to users at 50,000 hot spots worldwide.

But for the technology to work with any scale, mobile carriers have to sign on. Some European carriers, such as British telecom group
BT
, have begun offering UMA services, but no carrier in the U.S. has announced plans to do so. When the UMA phones from Nokia and others arrive in a few months, it is possible they’ll be homeless.

This hasn’t stopped analysts from making optimistic predictions about the technology’s success. Research firm ABI projects that some 120 million dual-mode Wi-Fi/cellular handsets will ship in 2010. And Strategy Analytics estimates that services that integrate land-line, Wi-Fi and cellular networks will generate $33 billion in 2010.

While the benefits of UMA phones to consumers and enterprise customers may seem obvious, carriers are still unsure of the risks associated with porting paying cellular customers onto Wi-Fi hot spots run by other companies, such as those in homes, workplaces, coffee shops and airports.

“It’s a disruptive technology that strikes fear, uncertainty and doubt in the minds of even the most seasoned telecom veterans these days,” says Cliff Raskind, director of the global wireless practice at Strategy Analytics.

First, there’s the issue of quality control: Wireless carriers can’t manage the wireless broadband connections supplied by Internet service providers. The frequencies in which Wi-Fi signals operate are often called “junk bands” because the wireless spectrum is cluttered with interference from microwaves and other consumer products. If the call quality over Wi-Fi is poor, customers might blame the carriers.

Then, there’s the complicated issue of pricing and minutes. If a carrier lets users make calls on their personal broadband networks, some customers might decide they don’t need to buy as many minutes per month from the carrier, decreasing the carrier’s average revenue per user.

But there are also plenty of benefits to cellular carriers who decide to offer calls over Wi-Fi or land-line office phones, says Philip Solis, an analyst at ABI Research.

Routing calls and data over the cellular network is expensive for carriers. Since consumers and customers already pay a set cell-phone bill bundled with a certain number of minutes, putting some of those minutes on another network (like a Wi-Fi network) could actually save money and free the always-crowded cellular network for other calls. In effect, carriers could charge two different customers for the same network access.

“The carriers were initially against this system,” says Solis. “But there has been an education process for them–it is a money-saving proposition for the consumer and the cellular service provider. Now they want to test the waters.”

T-Mobile will likely be the first U.S. carrier to offer UMA handsets and support, says Solis, who thinks the service might be offered by the beginning of 2007. A spokesman for T-Mobile would not confirm whether the company would support the technology, but said UMA and other radio technologies could potentially help the company replace landline minutes.

Cingular could follow with a slightly different technology called IMS, but first it must resolve concerns that in-home or office-based Wi-Fi calls could take revenues away from its parent company,
AT&T
.

UMA services are a natural fit for T-Mobile, say analysts, who note that the company could leverage the several thousand subscription-only hot spots it operates by giving UMA hand-set customers incentives to pay for Wi-Fi access.